The IMF global outlook of this year could be more optimistic
TIER's manufacturing and service composite indicators slowed down
lately

The Taiwanese Economy in September 2017

The second quarter performance of the US economy and European economy
remained as steady. The third quarter data of China was released
and the readings were better than the Market would have expected.
It is true that the improving global conditions could have helped
fuel Taiwan's industrial production and exports. However, the relatively
lower base effect has subsided. Consequently, the manufacturing
and service composite indicators issued by the Taiwan Institute
of Economic Research (TIER) decreased somewhat; however, the construction
indicator moved up in September.
Taiwan's exports in September 2017 increased by 17.52% compared
with the same month of 2016 that would be the fourth month of double
digit growth in exports. Regarding imports, Taiwan's imports in
September 2017 increased by 11.41% compared with imports in September
2016. Exports and imports grew by 14.28% and 14.71% y-o-y respectively
from January 1st till the end of September this year, Taiwan's exports
and imports gave a trade surplus of US$ 40.60 billion or an increase
by 12.29% on a y-o-y basis during this period.
Taiwan's consumer price index (CPI) went up by only 0.50% in September
2017 compared with the same month of previous year. The current
inflation rate has gradually moved back down compared with previous
months. The core inflation rate stood at 0.82% in September, 2017.
In addition, the wholesale price index (WPI) moved up by 1.62% in
August 2017 on the year-on-year basis. On the cumulative basis,
the CPI and WPI went up by 0.69% and 0.77% respectively compared
with the same period of last year.
As for exchange rate, the NTD went somewhat weaker due to the relatively
stronger USD, as the Fed had sent out certain hawkish messages.
As a result, the recent more hawkish announcement such as a year-end
rate hike and planned balance sheet unwind did strengthen the USD
later. Anyway, the NTD/USD stood at 30.305 in late September 2017
indicating a 0.34% depreciation. Regarding the interest rate, it
remained low and steady in September 2017 due to the continued loose
monetary operations by the CBC with respect to the most recent CPI
reading.

Business Outlook

The portion of manufacturing firms who perceived business were
better than expected in the target month was 30.6% or decreased
by 4.6 percentage points compared with respondents who perceiving
better business in the previous month. The portion of those perceived
business were getting worse in the target month was 21.2% or increased
by 0.2 percentage points than 21.0% perceiving worse business of
the previous month. The portion of manufacturing firms who perceived
business remained constant in the target month was 48.1% or increased
by 4.4 percentage points compared with 43.7% perceiving constant
business in the previous month. Overall, manufacturing firms perceived
the business in the target month was rather neutral.
In addition, the portion of manufacturers who perceived business
would be better in the next six months was 19.0% in the target month
or decreased by 5.5 percentage points than 24.5% feeling more optimistic
about the future in the previous month. The portion of firms who
perceived the economic outlook would be worsening was 15.3% or decreased
by 0.8 percentage points compared with 16.1% feeling rather pessimistic
about the future in the previous month. The portion of manufacturing
firms who perceived business remained constant in the next six months
stood at 65.7% or increased by 6.4 percentage points compared with
59.3% feeling neutral about the business outlook one month earlier.
Overall, manufacturing firms perceived the business in the near
future was also quite neutral.
The manufacturing composite indicator for September, 2017 adjusted
for seasonal factors on moving average, saw a downward correction,
and from a revision of as 102.22 points in August moved down to
101.72 points in September that would be the first dip after three-month
consecutive increase. Figure 1 shows a decrease of 0.50 points.
The TIER service sector composite indicator for September 2017 adjusted
for seasonal factors on moving average, also saw a downward correlation,
and from a revision of as 95.61 points in August moved down to 93.55
points in September that would be the first dip after a previous
one-month mount. Figure 1 shows a decrease of 2.06 points.
In addition, the TIER Construction Sector Composite Indicator for
September 2017 adjusted for seasonal factors on moving average however
saw an upward correction, and from a revision of 95.64 points in
August went up to 95.81 points in September. Figure 1 shows an increase
of 0.17 points, the first hike after a previous one-month dip.

Forecast on Individual Industries

Following are manufacturers' sentiments that are industry-specific
in the monthly TIER surveys:

● Manufacturers' sentiments that have been in decline in the September
survey and are expected to deteriorate over the next six months
include:
Plastic Products Manufacturing, Restaurants and hotels.

● Manufacturers' sentiments that have been in decline in the September
survey, but are expected to improve over the next six months include:
None.

● Manufacturers surveyed who felt the September outlook was the
same as the previous month, but the outlook is expected to exacerbate
over the next six months include:
Petroleum and Coal Products Manufacturing, Motor Vehicles Manufacturing.

● Manufacturers surveyed who felt the September outlook was the
same as the previous month, but the outlook is expected to improve
over the next six months include:
Printing, Plastics and rubber raw materials, Iron and Steel Basic
Industries, Motor Parts Manufacturing, Bicycles Parts Manufacturing,
Transportation and storage.

● Manufacturers' sentiments that have improved in the September
survey and is expected to deteriorate over the next six months include:
Data Storage Media Units Manufacturing and Reproducing.

● Manufacturers' sentiments that have improved in the September
survey and is expected to remain upbeat over the next six months
include:
Paper Manufacturing, Machinery and Equipment Manufacturing and Repairing,
Cutlery and tools Manufacturing, Industrial Machinery, Precision
Instruments Manufacturing, Wholesale, Securities.

● Manufacturers' sentiments that have improved in the September
survey and the trend is expected to continue for the next six months
include:
Slaughtering, Non-metallic Mineral Products Manufacturing, Cement
and Cement Products Manufacturing, Electronic Machinery, Communications
Equipment and Apparatus Manufacturing.